Jerome Powell and the FOMC delivered a unanimous vote today holding rates steady at around 5.1 per cent (target range of 5 per cent to 5.25 per cent); the first pause after 15 months of interest-rate hikes. However, the committee signaled that this does not mark the end of the tightening cycle with two more rate hikes potentially to come. In lies the question, if there are more increases on the horizon, why not act today? Well, Fed leaders stated that they prefer to wait to evaluate the impact of past increases on the economy, noting the difference between speed and magnitude of the tightening cycle. The median rate for the end of 2023 clocked in at 5.6% in today’s meeting, with a reiteration that these terminal rate estimates will continue to be data driven and are based on the information available today. The hawkish tone drove the 2-year yield up close to 17 bps immediately following the announcement along with slight declines in US equity indices, however during Powell’s remarks these initial knee-jerk moves began to pair back. The US economy this year has so far proved stronger than expected, with a resilient labour market continuing to support spending in areas such as a travel, entertainment and dining. Inflation remaining elevated above the 2 per cent target for more than two years highlights that the path to the Fed’s target still has a long way to go and we need to see evidence of weakening demand and a slowing labour market before we can be confident that price pressures are subsiding. Fed officials also updated economic forecasts, noting an estimate increase in GDP from 0.4 per cent to 1 percent, unemployment to average 4.1 per cent in the fourth quarter (compared to the 4.5 per cent estimated in March), and PCE inflation rate expected to come in at 3.2 per cent. The Fed will receive more data such as retail sales, housing starts and the Philadelphia Fed manufacturing survey before their July meeting, which will be a live meeting.